Report#:SR/OIAF/99-01

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[4]  Energy Information Administration, National Energy Modeling System: An Overview, DOE/EIA-0581 (Washington, DC, February 1998). In addition to providing baseline projections of U.S. energy markets, NEMS is used to provide analysis of energy issues at the request of the U.S. Congress, other parts of DOE, and other government agencies.

[5  Energy Information Administration, Annual Energy Outlook 1999, DOE/EIA-0383(99) (Washington, DC, December 1998).

[9] Energy Information Administration, Annual Energy Outlook 1999, DOE/EIA-0383(99) (Washington, DC, December 1998).

[10] Austan Goolsbee, "Investment Tax Incentives, Prices, and the Supply of Capital Goods," Working Paper 6192 (Cambridge, MA: National Bureau of Economic Research, September 1997).

[11] U.S. Department of Energy, Office of Building Equipment, Market Disposition of High-Efficiency Water Heating Equipment (Washington, DC, November 1996).

[12] Energy Information Administration, Technology Forecast Updates: Residential and Commercial Building Technologies--Reference Case, prepared by Arthur D. Little, Inc. (Washington, DC, September 1998).

[13] Fuel cell costs from Energy Information Administration, Technology Forecast Updates: Residential and Commercial Building Technologies--Advanced Adoption Case, prepared by Arthur D. Little, Inc. (Washington, DC, September 1998).

[14] Assumed financing terms also include a 20-percent down payment. Natural gas and electricity prices for this example are 1998 prices from Energy Information Administration, Annual Energy Outlook 1999, DOE/EIA-0383(99) (Washington, DC, December 1998).

[15] Reference case results based on assumptions used for the Annual Energy Outlook 1999 (AEO99). AEO99 and the assumptions for AEO99 are available on the EIA web site at www.eia.doe.gov.

[16] Personal communication from John McClelland, Office of Tax Analysis, Department of the Treasury, March 8, 1999.

[17] U.S. Department of Energy, Program for Energy Analysis of Residences (PEAR), DOE/SF/00098-H3 (Washington, DC, June 1989).

[18] U.S. Department of Energy, Office of Codes and Standards, MECcheck, Version 2.05 (Washington, DC, February 1998).

[19] DOE-2 and REM-RATE are two examples of building simulation models that are better equipped to handle some of these issues.

[20] Building Standards and Guidelines Program (BSGP), Setting the Standard, Vol. 7, No. 2 (1998).

[21] Other MEC codes include 1992 and 1993 versions. See Building Codes Assistance Project, web site www.solstice.crest.org/ efficiency/bcap.

[22] Alliance to Save Energy, "e-FFICIENCY NEWS" (March 1999).

[23] The U.S. Environmental Protection Agency web site describes the Energy Star Homes program, including results for the past 12 months. See web site http://yosemite.epa.gov/appd/eshomes/eshomes.nsf.

[24] Energy Information Administration, Solar Collector Manufacturing Activity 1993, DOE/EIA-017(93) (Washington, DC, August 1994).

[25] Energy Information Administration, Housing Characteristics 1997, DOE/EIA-0314(97), available on the EIA web site at www.eia.doe.gov/emeu.

[26] Energy Information Administration, Renewable Energy Annual 1996, DOE/EIA-0603(96) (Washington DC, March 1997), and Renewable Energy Annual 1998, DOE/EIA-0603(98) (Washington DC, December 1998).

[27] For more information on SMUD's PV Pioneer programs, see web site www.smud.org/home/pv_pioneer/index.html.

[28] Interpolation of estimated units from web site www.eren.doe.gov/millionroofs/benchmark.html.

[29] While this analysis does not explicitly include district energy systems, there is some indication that the economics of retrofitting existing systems with CHP are not very favorable. See M. Spurr, District Energy Systems Integrated with Combined Heat and Power, prepared by International District Energy Association for the U.S. Environmental Protection Agency (March 1999), p. 75.

[30] M. Spurr, District Energy Systems Integrated with Combined Heat and Power, prepared by International District Energy Association for the U.S. Environmental Protection Agency (March 1999), p. 43.

[31] While the Administration has not presented a detailed discussion of its intentions in this area, a list of possibilities can be found in T.R. Kasten, Turning Off the Heat (New York, NY: Prometheus Books, 1998).

[32] American Council for an Energy-Efficient Economy, Approaching the Kyoto Targets: Five Key Strategies for the U.S. (Washington, DC, August 1998).

[33] U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Office of Industrial Technologies: Summary of Program Results, DOE/EE-0184 (Washington, DC, January 1999).

[34] This analysis did not address the likelihood of the successful demonstration and widespread adoption of black liquor gasification combined-cycle technologies, which could lead to such a large increase in self-generation that the industry would become a net seller of electricity after 2010.

[35] Other analyses of CHP potential have assumed that most CHP additions will be gas-fired. See, for example, American Council for an Energy-Efficient Economy, Approaching the Kyoto Targets: Five Key Strategies for the U.S. (Washington, DC, August 1998), p. 28.

[36] Onsite Energy Corporation, "Basis for 60 GW of Remaining Cogeneration Potential in the Industrial Sector" (May 1997).

[37] The economic evaluation methodology draws heavily from two recent analyses of CHP from the Centre for the Analysis and Dissemination of Energy Technology (CADDET): Gas-Turbine-Based CHP in Industry (1993) and Small-Scale Cogeneration (1995). Some characteristics, such as heat rates of gas turbines, are based on data provided from Solar Turbines (owned by Caterpillar) and Allison Gas Turbines.

[38] Centre for the Analysis and Dissemination of Energy Technology (CADDET), Gas-Turbine-Based CHP in Industry (1993), p. 45.

[39] U.S. Department of Energy, Analysis of Energy-Efficiency Investment Decisions by Small and Medium-Sized Manufacturers, DOE/PO-0043 (Washington, DC, March 1996), Table 4-2. The same study reported that more than 40 percent of energy conservation projects with an immediate payback were not undertaken.

[40] The effective reduction in payback period is somewhat less than 8 percent. This results from the lower present value of depreciation allowances, since the depreciable basis is reduced by the amount of the credit.

[41] Investments should be nearing completion that will allow refineries to produce reformulated gasoline to meet reduced emissions requirements in January 2000. Capital investments may also be required to meet new standards that will reduce emissions of hazardous air pollutants (HAPS) from certain refinery units by 2002. In addition to these Federal requirements, separate gasoline requirements being adopted by States may require further investments. For instance, the State of Georgia has a requirement that the Atlanta area must use gasoline with reduced volatility and sulfur content. Upcoming rulemakings that would reduce the allowable sulfur content of gasoline and diesel are expected to require sizable investments. Further expenditures may also be required if concerns about methyl tertiary butyl ether (MTBE) contaminating water supplies lead to restrictions on its use as an oxygenate in gasoline.

[42] U.S. Environmental protection Agency, Office of Mobile Sources, EPA Staff Paper on Gasoline Issues, EPA-420-R-98-005 (Washington, DC, May 1998).

[43] Low-sulfur gasoline specifications will be implemented in NEMS when the regulations are finalized. EPA estimates that low-sulfur gasoline will cost 1 to 3 cents more per gallon. Because gasoline sulfur and automotive emissions are linked, the proposal will be issued in conjunction with the new "Tier 2" vehicle exhaust emissions standards, which would take effect between 2004 and 2007. Also expected in 1999 is a preliminary notice of proposed rulemaking that would reduce the sulfur content of diesel fuel to accommodate reductions in emissions of NO_x and particulates.

[44] The reference case for this analysis differs slightly from the reference case used for the Annual Energy Outlook 1999. The difference reflects the revised methodology used to project cogeneration.

[45] Note that this estimate does not include the "bunching effect" that could arise if projects that would have been undertaken without the credit in 1999 or 2003 were moved to the 2000-2002 window to take advantage of the tax credit.

[46] By comparison, in "President Clinton's FY 2000 Climate Change Budget," p. 2, the Administration estimates that the credit will reduce tax revenues by $332 million. Assuming that the installed cost for CHP systems averages $1,000 per kilowatt, this implies that the Administration anticipates that qualifying CHP additions during the 3-year period will be 3,750 megawatts. It is not known what portion of the Administration's tax revenue reduction estimate is due to unintended beneficiaries.

[47] U.S. Environmental Protection Agency, Office of Atmospheric Programs, Office of Air and Radiation, Guidance on Establishing an Energy Efficiency and Renewable Energy (EE/RE) Set-Aside in the NOx Budget Trading Program (Washington, DC, March 1999).

[48] Energy Information Administration, Annual Energy Outlook 1999, DOE/EIA-0383(99) (Washington, DC, December 1998).

[49] AFVs are vehicles that use alternative fuels (other than gasoline or diesel fuel). AVT vehicles use advanced vehicle technologies but consume conventional fuels (examples include gasoline-electric hybrids, diesel-electric hybrids, and gasoline fuel cells). LDVs include all passenger cars, minivans, sport utility vehicles, and pickup trucks.

[50] Consumer purchase (market penetration) criteria were based on the U.S. Department of Energy's National Alternative-Fuel Vehicle Survey and were implemented in the NEMS transportation module by EIA's Office of Integrated Analysis and Forecasting in coordination with the U.S. Department of Energy, Office of Transportation Technologies, and Argonne National Laboratory.

[51] According to the Partnership for a New Generation of Vehicles (PNGV) program, the earliest possible availability date for a production prototype fuel cell vehicle would be 2004. Chrysler has announced that a production prototype will be available by 2004. Inherent in the 2006 date is a 2-year period to convert production prototypes to actual production vehicles and to modify production lines and facilities.

[52] Only in the State of California may manufacturers meet up to 60 percent of the Low Emission Vehicle Program's Zero-Emission Vehicle (ZEV) mandates with sales of electric hybrid vehicles. However, electric hybrid vehicles receive no more than approximately 30 to 60 percent of one ZEV credit. For example, the Toyota Prius would receive 0.32 ZEV credits. Therefore, electric hybrid sales could be higher in California.

[53] There is a great deal of uncertainty associated with incremental vehicle cost for present advanced technology vehicles as well as in the future. Automotive Issues has estimated the Prius incremental cost to be approximately $15,000 (see Automotive Issues, Trends Issue, March 1998). DOE's Office of Transportation Technologies has estimated the incremental vehicle cost at about $4,000 (see U.S. Department of Energy, Technology Costs of the Toyota Prius, July 16, 1998); however, the incremental cost does not include vehicle price markups. Toyota has said that the Prius will sell for more than $15,500 but less than $22,000, implying an incremental cost of up to $7,000 including the markup (see Electric Vehicle Today, August 27, 1998).

[54] Although some manufacturers have offered price incentives up to approximately $2,000 for advanced vehicles, it is not clear whether they will continue to do so, especially since past vehicle price incentives usually have been offered only for the first 2 years after their introduction.

[55] Energy Information Administration, Annual Energy Outlook 1999, DOE/EIA-0383(99) (Washington, DC, December 1998), p. 116.

[56] Toyota has publicly announced that it would not introduce the Prius into the U.S. market without improving the efficiency of the ambient vehicle temperatures (air conditioning and heating) and increasing the performance to match recent U.S. consumer demand. Both alterations to the original Prius design will lower its fuel economy.

[57] Closed-loop biomass facilities are fueled by organic material from crops that are planted exclusively for use in electricity production.

[58] This value excludes about 60 megawatts of repowered wind plants in California that are able to qualify for the EPACT PTC.

[59] Anecdotal information suggests that new units recently or about to come on line are using some specialized low-cost waste stream.

[60] The bill is currently being revised, and the RPS requirement may change.

[61] Energy Information Administration, Annual Energy Outlook 1999, DOE/EIA-0383(99) (Washington, DC, December 1998).

[62] Energy Information Administration, Annual Energy Outlook 1999, DOE/EIA-0383(99) (Washington, DC, December 1998), Tables F1 and F2.

[63] "Report to Congress on Federal Climate Change Expenditures," p. 11.

[64] Personal communication with the Energy Star program manager, April 5, 1999.

[65] Program goals and estimate of annual electricity consumption are from "Shaking out Savings," Association of Energy Services Professionals, Strategies, Vol. 10 No. 1 (Winter 1999), p. 7. The consumption and inventory figures in this article are actually closer to figures for canned beverage vending machines found in Arthur D. Little, Inc., Energy Savings Potential for Commercial Refrigeration Equipment (June 1996), which estimated annual consumption for canned beverage vendors at about 7 billion kilowatthours in 1994.

[66] See the Million Solar Roof web site, www.eren.doe.gov/millionroofs/.

[67] U.S. Environmental Protection Agency, Helping Build a Better Future--ENERGY STAR Buildings and Green Lights 1997 Year in Review (Washington, DC, April 1998).

[68] Information on FEMP is available at web site www.eren.doe.gov/femp/.

[69] U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Office of Industrial Technologies, Summary of Program Results, DOE/EE-0184 (Washington, DC, January 1999), p. 9.

[70] Energy Information Administration, Annual Energy Outlook 1999, DOE/EIA-0383(99) (Washington, DC, December 1998), Table F3.

[71] For a more detailed description of the Industries of the Future program, see U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Office of Industrial Technologies, Summary of Program Results, DOE/EE-0184 (Washington, DC, January 1999), p. 9.

[72] "Report to Congress on Federal Climate Expenditures," p. 18.

[73] Energy Information Administration, Annual Energy Outlook 1999, DOE/EIA-0383(99) (Washington, DC, December 1998), p. 113.

[74] Energy Information Administration, Annual Energy Outlook 1999, DOE/EIA-0383(99) (Washington, DC, December 1998), p. 126.

[75] U.S. Environmental Protection Agency, Climate Wise Progress Report, EPA 231-R-98-015 (Washington, DC, October 1998), p. 4.

[76] "Report to Congress on Federal Climate Expenditures," p. 18.

[77] Energy Information Administration, Annual Energy Outlook 1999, DOE/EIA-0383(99) (Washington, DC, December 1998), Table F4.

[78] Including maintenance and operating costs and purchase price.

[79] National Research Council, Partnership for a New Generation of Vehicles: Fourth Report (Washington, DC: National Academy Press, 1998).

[80] The NRC will be reviewing the PNGV program in a fifth report,which will be completed by the end of April 1999.

[81] The National Research Council review of the PNGV program in the Fourth Report states on page 77: "Thus, the hybrid features may not meet the PNGV criteria for equivalent cost of ownership and may ultimately have questionable marketability for this class of passenger vehicles." The NRC also commented on the cost and fuel efficiency performance goal: "Fuel cells still face substantial obstacles to meeting performance and cost goals within the 2000 to 2004 time frame . . . [a]lthough the 65 mpg falls short of the 80 mpg target . . . ."

[82] Energy Resources R&D Portfolio, Draft-2 (2/6/99).

[83] U.S. Department of Energy Office of Transportation Technologies, Program Analysis Methodology (Washington, DC, January 15, 1999), p. 21.

[84] For a more detailed description of the transportation module, see Chapter 2, page 30.

[85] Energy Resources R&D Portfolio, Draft-2 (2/6/99), p. 204.

[86] Ethanol blended into gasoline in 1997 represented 0.9 percent of net petroleum imports and 1.0 percent of motor gasoline product supplied.

[87] U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Scenarios of U.S. Carbon Reductions, Potential Impacts of Energy Technologies by 2010 and Beyond (Washington, DC, September 1997), pp. 5.30-5.31.

[88] Oxy-Fuel News Monthly Market Update (December 21, 1998).

[89] Some State environmental agencies are considering restrictions on the use of MTBE. If the use of MTBE were restricted and oxygen content requirements for gasoline remained in place, the use of ethanol would likely increase considerably.

[90] This contrasts with the National Biomass Ethanol Program estimate of a 50-percent reduction by 2020.

[91] This learning function was subject to extensive review. See Energy Information Administration, NEMS Component Design Report: Modeling Technology Penetration (Washington, DC, March 1993).

[92] Motivated by a desire to develop new markets for agricultural products, States are assumed to provide the same subsidies for cellulose ethanol as for corn ethanol.

[93] Energy Information Administration, Annual Energy Outlook 1999, DOE/EIA-0383(99) (Washington, DC, December 1998); and Impacts of the Kyoto Protocol on U.S. Energy Markets and Economic Activity, SR/OIAF/98-03 (Washington, DC, October 1998).

[94] Energy Information Administration, Impacts of the Kyoto Protocol on U.S. Energy Markets and Economic Activity, SR/OIAF/98-03 (Washington, DC, October 1998).

[95] Electric Power Research Institute and Office of Energy Efficiency and Renewable Energy, U.S. Department of Energy, Renewable Energy Technology Characterizations, EPRI TR-109496 (December 1997), pp. 4-23-4-24.

[96] Renewable Energy Technology Characterizations, EPRI TR-109496 (December 1997), p. 5-57.

[97] For understanding of DOE's wind technology expectations, EIA relied on the wind technology characterization published jointly by DOE and the Electric Power Research Institute (EPRI) in Renewable Energy Technology Characterizations, EPRI TR-109496 (December 1997), pp. 6-1, 6-31.

[98] Renewable Energy Technology Characterizations, EPRI TR-109496 (December 1997), pp. 7-3.

[99] Energy Information Administration, Annual Energy Outlook 1999, DOE/EIA-0383(99) (Washington, DC, December 1998), p. 134.

[100] C. Flavin, "A Force To Be Reckoned With, The Wind Power Market Boomed in 1998," Renewable Energy World, Vol. 2, No. 2 (March 1999), p. 17.

[101] National Renewable Energy Laboratory, Hydrogen Program Overview, DOE/GO-10095-088, DE94011827 (February 1995).

[102] National Renewable Energy Laboratory, Superconductivity Program Overview, DOE/GO-10095-012, DE95000204 (February 1995).

[103] National Renewable Energy Laboratory, Superconductivity Program Overview, DOE/GO-10095-012, DE95000204 (February 1995).

[104] The time line discussed here is the one given for central air conditioners by DOE's Office of Codes and Standards.

[105] "President Clinton's FY 2000 Climate Change Budget," p. 6, and "Report to Congress on Federal Climate Change Expenditures," p. 11.

[106] American Council for an Energy-Efficient Economy, Approaching the Kyoto Targets: Five Key Strategies for the U.S. (Washington DC, August 1998).

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